I’m preparing my new course on Economics for Public Policy that I start teaching at the University of Manchester in a few weeks, and one of the things preoccupying me as I look over the specific material is the evaluation question. Of course impact assessments are a big deal now, and randomised control trials (disguised as ‘pilots’ in the developed world context) very fashionable. Looking at whether policy interventions actually achieve what they were meant to is of course important; and the answer is usually ‘no’ as a host of recent books ([amazon_link id=”1780744056″ target=”_blank” ]The Blunders of Our Governments[/amazon_link] by Anthony King and Ivor Crew, [amazon_link id=”0691161623″ target=”_blank” ]Why Government Fails So Often[/amazon_link] by Peter Schuck, [amazon_link id=”0815793898″ target=”_blank” ]Government Failure vs Market Failure[/amazon_link] by Clifford Winston, [amazon_link id=”0199322198″ target=”_blank” ]Wrong[/amazon_link] by Richard Grossman) amply testify. But I’ve been thinking more about what the policies are meant to achieve in the first place, the underlying social welfare justification. I started mulling this over when writing last year’s Pro Bono Economics Lecture, The Economist as Outsider, and the philosophical basis of the standard approach in economic policy – identify the market failure and the corresponding Pigouvian intervention – seems profoundly flawed the more you think about it. The recent excellent Interfluidity blog posts on welfare economics spell out some of the issues.

[amazon_image id=”1780744056″ link=”true” target=”_blank” size=”medium” ]The Blunders of Our Governments[/amazon_image]

That’s a subject for another day, possibly another book. Meanwhile, I just read [amazon_link id=”0231153287″ target=”_blank” ]The Arrow Impossibility Theorem[/amazon_link], lectures by Eric Maskin and Amartya Sen. It’s not an easy read, but it does make the Impossibility Theorem as simple as can be – pretty much equation-free, and clearly explained by two of the biggest brains in the business. Maskin’s lecture looks at the implications for voting systems, Sen’s at the informational basis on which one can make social welfare assessments. The book is an excellent one stop shop on the Impossibility Theorem. Useful for teaching it, and also an important reminder to economists who talk about or operate in the policy world that this question of social welfare is difficult and important.

[amazon_image id=”0231153287″ link=”true” target=”_blank” size=”medium” ]The Arrow Impossibility Theorem (Kenneth J. Arrow Lectures Series)[/amazon_image]

At the moment I’m alternating between intense reading of books and papers for my new course, and fun stuff, while saving the really light reading for a few days’ holiday later this month. So the advance copy of [amazon_link id=”0691163138″ target=”_blank” ]The Mystery of the Invisible Hand[/amazon_link] by Marshall Jevons arrived at the perfect moment, and it’s a very enjoyable romp – campus novel meets detective novel meets economics primer. Nobel Prize winning economist Henry Spearman uses economic logic alone to solve a murder, the power of the little grey cells amplified by the muscular rigour of economics.

[amazon_image id=”B00KAJJBV0″ link=”true” target=”_blank” size=”medium” ]The Mystery of the Invisible Hand: A Henry Spearman Mystery[/amazon_image]

Marshall Jevons is, needless to say, a pseudonym, and this is the third in the series, following on from [amazon_link id=”0691059691″ target=”_blank” ]A Deadly Indifference[/amazon_link] and [amazon_link id=”0691164010″ target=”_blank” ]Murder at the Margin[/amazon_link].

There are many nice touches. I liked the fact that the classroom building is called Hamermesh Hall. I *loved* this quotation from Carl Christ at the head of one chapter: “I have heard an unkind critic say that an economist is someone who would sell his grandmother. This is quite wrong. An economist, or at least a good economist, would not sell his grandmother to the highest bidder unless the highest bid was enough to compensate him for the loss of his grandmother.”

As a way to bring some basic economic concepts to life for students, this is an excellent series, although of course not Great Literature. Russ Roberts’ novels, [amazon_link id=”0691143358″ target=”_blank” ]The Price of Everything[/amazon_link] and [amazon_link id=”0262681358″ target=”_blank” ]The Invisible Heart[/amazon_link], are similarly both enjoyable and educational. (He, by the way, has a terrific new book out, [amazon_link id=”1591846846″ target=”_blank” ]How Adam Smith Can Change Your Life[/amazon_link].)

[amazon_image id=”1591846846″ link=”true” target=”_blank” size=”medium” ]How Adam Smith Can Change Your Life: An Unexpected Guide to Human Nature and Happiness[/amazon_image]

As I’ve long argued, economists are particularly amenable to two strands of genre fiction, detective and sci-fi novels. The ur-models of rational homo economicus are Hercule Poirot (or perhaps Sherlock Holmes) and Mr Spock, logical, calculating, and totally brilliant naturally. Paul Krugman was famously inspired to become an economist by reading Isaac Asimov’s [amazon_link id=”184159332X” target=”_blank” ]Foundation Trilogy[/amazon_link].

I’m a detective fiction person myself – economists have that same impulse as the writers of these books, I think, namely to bring some order to a disordered world.

[amazon_image id=”184159332X” link=”true” target=”_blank” size=”medium” ]Foundation Trilogy (Everyman’s Library (Alfred A. Knopf, Inc.))[/amazon_image]

Well, I enjoyed [amazon_link id=”0691156646″ target=”_blank” ]Finding Equilibrium: Arrow, Debreu, McKenzie and the Problem of Scientific Credit[/amazon_link] bu Till Düppe and Roy Weintraub. The story is fundamentally simply: Arrow was a sunny-natured genius who excelled in many areas, Debreu a schemer who sought to maximise credit to himself and spent years fretting about whether he would get the Nobel Prize, and McKenzie was unlucky and undeservedly failed to get sufficient credit for his work. The book in the end puts this down to the ‘Matthew effect’, namely that those who are already better known or at more eminent places get greater credit: “for whosoever hath, to him shall be given, and he shall have more abdundance.” Whereas Debreu is (diplomtically) described thus: “His strategizing with respect to credit was the subtlest.”

[amazon_image id=”0691156646″ link=”true” target=”_blank” size=”medium” ]Finding Equilibrium: Arrow, Debreu, McKenzie and the Problem of Scientific Credit[/amazon_image]

The work they all did on existence proofs for general equilibrium was ‘in the air’ at the time. All three men had read the same papers, such as the newly-translated work by Abraham Wald, and John Von Neumann’s game theory: “John von Neumann’s authority fused pure mathematics with the eclectic spirit of applied research. The work of McKenzie, Arrow and Debreu would differently make manifest this fusion.” Early biographies treated von Neumann either as the deranged Dr Strangelove or a genius; Düppe and Weintraub cite more recent and more balanced biographies, to which I would add the portrait in George Dyson’s absolutely terrific book about that Princeton milieu, [amazon_link id=”014101590X” target=”_blank” ]Turing’s Cathedral[/amazon_link].

[amazon_image id=”014101590X” link=”true” target=”_blank” size=”medium” ]Turing’s Cathedral: The Origins of the Digital Universe (Penguin Press Science)[/amazon_image]

[amazon_link id=”0691156646″ target=”_blank” ]Finding Equilibrium[/amazon_link] identifies a 1949 conference under the auspices of the Cowles Commission as a launch event for “a new kind of economic theory growing from game theory, operations research and the related mathematical techniques of convex sets, separating hyperplanes and fixed point theory.” (I can’t resist retelling the story of the cookie recipe one of my colleagues put in the Economics Department newsletter when we were suffering through that work ourselves: roll the dough into balls; place the convex sets on a separating hyperplane and bake in a medium oven for 20 minutes.”) The idea was to extend successful wartime planning techniques to a peacetime economy; planning segued from being a political choice to being a question of productive efficiency in a mixed economy.

The conference was multi-disciplinary. “Nearly all the ingredients of an existence proof were on the conference table,” the book notes. Later (1987) Ken Arrow insisted that if he, Debreu and McKenzie hadn’t done the joining together, somebody else would have, using von Neumann’s work along with Tjalling Koopman’s work on production or John Hicks on consumer theory. However, Arrow stands out in this account for the breadth of his interests. “He was unsympathetic to the manner in which such analysis [ie. general equilibrium analysis] was increasingly being used in economic research; the hermetic spirit of such analyses stood in stark contrast to his open, interdisciplinary-cybernetics spirit.” He disliked the use of the Arrow-Debreu theory, concerning perfectly competitive markets, ‘precisely where it is not applicable’.

The last word ought to be the [amazon_link id=”0631125051″ target=”_blank” ]quotation from Wittgenstein[/amazon_link] that opens the final section of [amazon_link id=”0691156646″ target=”_blank” ]Finding Equilibrium[/amazon_link]:

“For it is not merely that the existence-proof can leave the place of ‘the existent’ undetermined: there need not be any question of such a place.”

The logical demonstration of the existence of equilibrium in the realm of topology is just that.